Shares of AU Optronics Corp (
AU Optronics stock gained 2.7 percent, after rising as much as 4.5 percent in earlier trading, to close at NT$49.90 in Taipei, while Quanta Display surged 6.6 percent to its daily limit of NT$12.90. The nation's benchmark Taiex index fell 0.02 percent by the 1:30pm close.
"The biggest potential benefit for AU Optronics is acquiring Quanta Display's" three factories, including one so-called 6th-generation facility, for "US$2 billion total, versus US$3 billion" to build one 6th-generation plant, Jeffrey Su (蘇志凱), a Taipei-based analyst at Merrill Lynch & Co said in a research report last Friday.
LCD companies are seeking greater efficiency to profit from surging flat-panel television demand after screen prices tumbled 17 percent in the past year. The combined company would boast 18 percent of industry capacity, compared with 19 percent each for Samsung Electronics Co and LG.Philips LCD Co, based on DisplaySearch figures.
"Smooth integration and execution will be the key challenge," Su said.
The US brokerage has a "neutral" rating on AU Optronics' stock.
Shares of Quanta Display's parent, Quanta Computer Inc (廣達電腦), climbed 6.9 percent to the daily limit of NT$55.70.
AU Optronics, based in Hsinchu, said on Friday that it would issue one share for every 3.5 of Taoyuan-based Quanta Display's. At Friday's closing stock price, the acquisition was worth about NT$71.7 billion (US$2.2 billion), a premium of 15 percent.
Quanta Display posted a net loss of NT$9.1 billion for the nine months ended Sept. 30 last year, and had debt of US$1.8 billion.
The Taiwanese company hasn't yet reported its fourth-quarter and full-year figures.
"Quanta Display is likely to post losses in the first half and it could possibly break even by the year end," said Su.
The consolidation date of the merger is targeted for Oct. 1 and is subject to the approval of both companies' shareholders.
The AU Optronics transaction is the biggest acquisition in Taiwan since Fubon Financial Holding Co (
The purchase would be the first in the industry since China's BOE Technology Group Co (
AU's purchase "move may even spark more mergers in the industry" said Barro Liao (
"A mega merger like this can really excite investors," he said.
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